Sure, you can get title loans in Jacksonville, FL and other places with no concern about your credit score’s impact. But that’s different. Nearly all other lenders rely greatly on your score to determine not only whether you’re approved, but what your credit limit and interest rate will be. Your number also can influence whether you get that job you want, or even an apartment, insurance, or cell phone. Here are the primary factors that influence your credit score.
What is a Credit Score?
It’s a three-digit numeral that reflects the likelihood that you’ll repay your debts. It generally indicates how risky it is to do business with you.
The store is calculated from data contained in your credit report – a picture of your credit activities over the last seven to 10 years.
There are three national credit bureaus: Experian, Equifax, and TransUnion. While scoring systems have differing ways of calculating your credit score, most lender use FICO. Credit scoring models compare your data to the credit behavior of those with similar profiles and assign your score, typically between 300-850. The higher the number, the better.
What Factors Affect My Credit?
Scores are based on these factors:
- Payment history. How consistently you’ve made on-time payments comprises 35% of your credit score. It’s the single-most important determinant in your score.
- Amount due. This is the amount of outstanding debt you have – the lower the number is, the higher your credit score. The amount you owe is worth 30% of your score.
- Length of credit history. This refers to how long you’ve had credit in your name. The longer, the better. Creditors and others want to see how long you’ve been managing credit. Your credit history makes up 15% of your credit score.
- Credit inquiries. The amount of new credit you apply for makes up 10% of your score. Your score drops by a few points every time you apply for credit, save for one exception: if you’re comparison shopping, say for a loan, only one inquiry is counted within a 14 to 45-day period. Inquiries can remain on your report for up to two years.
- Your mix of credit. Lenders in particular want to see whether you can handle different types of credit, such as revolving and installment debt. Your mix of credit influences 10% of your score.
What Can I Do to Maintain Good Credit?
It’s inevitable that your credit score will increase and decrease through the years. Still, you’ll usually wind up on the sunny side of credit if you do these things:
- Make payments on time, every time. If you must miss a payment, make it as soon as you can. Creditors typically don’t report missed payments until at least two weeks pass.
- Be certain your debt load is manageable.
- Pay the entire amount due. If you can’t, be sure you pay more than the minimum amount due.
- Try to use as little of your credit limit as you can.
- Check your credit reports at least annually for possible errors, and to learn where you stand credit-wise.
- Don’t trigger excessive inquiries by shopping for too much credit.
In Summary
Your credit score follows you everywhere and can have a tremendous impact on your financial health and quality of life. That’s why it’s so important to understand the factors that influence your credit score. Remember, though, that if you’re in a pinch, a title loan could work – with no concern about your score.
